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Lecture 3

BUSI 3309 Lecture 3: Risk Management

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Carleton University
BUSI 3309
Paul Kendrick

Risk Management Should be built on prior projects results Risk Management Planning Project risks take shape during planning Focus on externalities Must be done first Risk Identification Risk dependant on technicalenvironmental factors Delphi method is useful Risk based on Impact and Probability Accept: cost to mitigate > cost to accept (contingency funds) Transfer: low chance, high impact (insurance, outsource) Mitigate: high chance, minimal impact (management control systems) Avoid: high chance and high impact (reduce project scope) Qualitative Risk Analysis Ways project can fail Based on severity, likelihood, ability to detect Risk Priority Number (RPN) o RPN = Severity x Likelihood x Ability to detect Contingency Plan Alternative plan for foreseeable risks Risks of no plan o Slow managerial response o High pressure can be dangerouscostly Opportunity Management Tactics Exploit: ensure opportunity happens by eliminating uncertainty Share: share ownership of opportunity with other party Enhance: increase probabilitypositive impact of opportunity Accept: take action if opportunity shows up but take no action to pursue it Contingency Funds Budget Reserves: linked to the identified risks of specific work packages Management Reserves: large funds to cover unforeseen risks Time Buffers: time used to compensate for unplanned delays in project schedule 5 ways to handle Scope Creep 1. Be clear about original project (contract) 2. Indicate extra work completed
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